Banjo Smyth

Today I would like to look at WHY everyday people think that the stock market is risky.

The simple answer is because most everyday investors lose money when they invest in the stock market. . . . . let’s have a look why?

The history of the stock market shows us that if you were to invest ‘long term’ you would have made a good profit. Why then do a large percentage of mum and dad investors lose money on the stock market?

Everyday investors have a ‘great’ habit of investing when the market is at its peak (or during the top 30% of the cycle). They tend to get caught up in the media hype and buy when the market is close to fully priced. Do you remember the media during the recent commodities boom? There were articles everywhere about how ‘this boom is different’ and it will ‘last forever’ or oil prices to top ‘300’ etc etc.

Unfortunately the media are terrible investors. By the time the media are reporting on investment trends or prices the chances are that the stock prices have already been affected and you have missed the boat. To make matters worse for mum and Dad investors not only do they generally buy at the peak of the market but they sell and the bottom as well. Why? Once again they believe the media hype and jump ship when their investments have halved in price. Notice how the same people that were convinced the commodities boom would last forever change their tune are write about how this stock market crash going to last forever.

Successful investors don’t make their investment decisions based on what the newspapers are saying. They look at internal market indicators that steer clear of media hype and make rational decisions based on value and facts. In recent time Warren Buffet has been criticized for his investment decisions. So called experts have said that ‘Buffet has finally lost his touch’ and that he must be crazy to invest so aggressively during these hard times. Let’s wait and see what happens – who’s side are you going to on?

The media

Vs

Warren Buffet

I know whose investment strategies I will be following